The appeals court last week denied attempts by Bahamas citizen Kelvin Leach to overturn an order freezing accounts that are alleged to be connected to money laundering and other criminal activity.
Mr. Leach is one of six individuals accused in a September 2014 U.S. indictment of allegedly orchestrating a $500 million offshore asset protection scheme, securities fraud and money laundering.
Among other allegations, the indictment states that an undercover law enforcement agent made recorded telephone calls with Mr. Leach, where the two discussed the agent’s scheme to conceal his true beneficial ownership of an offshore company, engage in market manipulation of publicly traded companies, evade reporting requirements and the payment of taxes to the IRS and transfer proceeds of fraud in the sale of securities to and from the United States.
In response to U.S. Department of Justice requests, Cayman authorities obtained an order in October 2014 to freeze “certain accounts” that were connected to the alleged criminal scheme.
One of the defendants, Brian De Wit, successfully challenged that freezing order on the grounds that the only evidence used by Cayman authorities to obtain the order was a U.S. indictment. According to the recent appeals court judgment, Grand Court Justice Richard Williams stated in June 2015 that he was not satisfied by what he regarded as no more than a “regurgitation” by Cayman authorities of the U.S. indictment.
However, U.S. authorities requested for other accounts to be frozen a month later, and Cayman authorities obtained a restraint order in December 2015. This order was the subject of Mr. Leach’s appeal.
Mr. Leach first challenged the restraint order in May 2017, but Grand Court Justice Charles Quin ruled that the accounts should remain frozen. Justice Quin stated that there was evidence that Mr. Leach used shell companies – including one registered in Cayman – to break up and transfer illegal funds to clients in Canada and the U.S.
Mr. Leach then took his case to the Court of Appeal, where his attorneys argued that the account freezes were unlawful because there was no criminal investigation started in Cayman and because the evidence on which the orders were made was inadequate.
The Cayman authorities did not present the original evidence on which the U.S. indictment was based, according to the appeals judgment.
“The appellants contended that absent any statements from those involved in an undercover operation in which an FBI agent posed as a stock promoter, and absent the disclosure of the records and the wire taps, the evidence was inadequate,” the judgment states. “It was no more than hearsay or hearsay of hearsay.”
Mr. Leach’s challenge was similar to the successful one made by Mr. de Wit, who had his restraint order overturned because the Grand Court criticized Cayman authorities for their “regurgitation” of a U.S. indictment.
However, the appeals court noted that Mr. de Wit’s case is different because he was challenging a domestic restraint order, which did not have statutory rules for the evidence to be presented in court. Mr. Leach’s challenge, on the other hand, was made to an external confiscation order, and the legislation for these orders specifically states that authenticated foreign documents can be used as evidence.
While the appeals court dismissed Mr. Leach’s challenge, it also chastised the Crown for not fully disclosing material documents related to the case. According to the judgment, the Crown did not disclose Justice Williams’s judgment referenced above, as well as another judgment from Belize that denied a freezing order in relation to the same alleged scheme.
Justice of Appeal Alan Moses wrote that the undisclosed judgments did not play a significant role in this hearing because they had to do with different points of the law.
“But both decisions should nonetheless have been disclosed because they were of assistance in enabling the defence, on the one hand, to attempt to align the approach for which they were contending in the application of the discharge of an external restrain order and the Crown to draw the contrast for which it contended,” stated Justice Moses, who also wrote that the undisclosed judgments both “concerned the same subject-matter and the same fraud and money-laundering activities.”